1003-00005 · Veldran Industries Holdings · Administrative/Dormancy

matter-dormancy-memorandum.docx DOCUMENT Bankruptcy & Restructuring

2 / 36 ← → ✕

Contract analysis Extract to table

MEMORANDUM

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT FOR INTERNAL USE ONLY

CALDERWOOD & HARKNESS LLP 1301 Avenue of the Americas, 40th Floor New York, NY 10019

August 29, 2022

TO: File — Matter No. HRW-SPIN-001 (Engagement No. 1003-00005)

FROM: Garrett Simmons, Tax Department (Lead Associate)

REVIEWED AND APPROVED BY:

Leonard Cross, Partner, Tax Department (Responsible Partner)

Sylvia Hartwell, Partner, Tax Department (Billing Partner)

RE: Matter Status Change to Dormant — Harrowgate Private Equity Fund IV, L.P. / Veldran Industries Holdings, Inc. — Proposed Tax-Free Spin-Off of Meridian Flow Technologies, Inc.

Right-click to update Table of Contents

I. Purpose of Memorandum

This memorandum documents the decision to change the status of Matter No. HRW-SPIN-001 (Engagement No. 1003-00005) from "Active" to "Dormant," effective as of August 29, 2022. The matter is being designated as dormant rather than closed in order to preserve the possibility of reactivation at the client's election, and to ensure that all work product, diligence files, correspondence, and related materials are maintained in an organized and accessible manner in the firm's document management system.

The matter involved the rendering of a "should" level tax opinion under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), in connection with the proposed pro rata spin-off by Veldran Industries Holdings, Inc. ("Veldran" or the "Distributing Corporation") of one hundred percent (100%) of the common stock of Meridian Flow Technologies, Inc. ("Meridian" or "SpinCo") to the shareholders of Veldran on a pro rata basis (the "Spin-Off"). The Spin-Off was structured to consist of two integrated steps: (a) a contribution of all assets and liabilities of Veldran's Precision Flow Solutions Division to Meridian in exchange for all of the outstanding common stock of Meridian and the assumption by Meridian of certain allocated liabilities (the "Contribution"), followed immediately by (b) a pro rata distribution by Veldran of all Meridian common stock to the Veldran shareholders (the "Distribution").

The client in this engagement is Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV" or "Harrowgate"), a Delaware limited partnership. On August 22, 2022, Christine Yeung, General Counsel of Harrowgate Capital Advisors LLC (the investment advisor and manager of HPE Fund IV), informed Calderwood & Harkness LLP by email that Harrowgate had determined to pause the proposed Spin-Off indefinitely. Ms. Yeung's email did not characterize the decision as a termination of the transaction or of the engagement, but rather as an indefinite suspension, reflecting the possibility that the Spin-Off might be revisited at a future date should circumstances change. A copy of Ms. Yeung's email has been preserved in the correspondence file for this matter.

This memorandum sets forth:

(a) a summary of the engagement background, including identification of the client, the key parties, the engagement scope, the other advisors involved, and the proposed transaction structure;

(b) the reasons underlying the client's decision to pause the Spin-Off and Calderwood & Harkness's decision to mark the matter dormant, including the principal legal and factual impediments to completion of the tax opinion;

(c) the status of all work product at the time of dormancy, including a timeline of key milestones, a catalog of completed work product, and a summary of outstanding and incomplete items;

(d) instructions for the preservation and management of work product and files;

(e) a billing and financial summary, including hourly rates, hours and fees accrued, invoices rendered, and unbilled work-in-progress; and

(f) conclusions and recommendations regarding the matter going forward.

This memorandum is intended solely for internal use by the firm and constitutes attorney work product. It is not intended for distribution to the client or any third party. A separate formal letter addressed to Christine Yeung confirming the dormancy of the matter, the preservation of work product, and the status of unbilled fees is being transmitted concurrently with this memorandum.

II. Engagement Background

A. Client and Key Parties

1. Client. The client in this engagement is Harrowgate Private Equity Fund IV, L.P., a Delaware limited partnership formed under the Delaware Revised Uniform Limited Partnership Act. Harrowgate's Employer Identification Number is 84-3291067. Its registered address is 1209 Orange Street, Wilmington, Delaware 19801 (c/o Crowne Albany Corporation, as registered agent). Its principal office is located at 600 Lexington Avenue, 38th Floor, New York, New York 10022.

HPE Fund IV is a private equity fund with a vintage year of 2018 and a total committed capital of approximately $6.8 billion. The fund pursues control-oriented investments in middle-market and upper-middle-market industrial and specialty manufacturing companies.

2. General Partner

The general partner of HPE Fund IV is Harrowgate Capital Partners IV GP LLC, a Delaware limited liability company (EIN 84-3291104). As general partner, Harrowgate Capital Partners IV GP LLC has the authority to act on behalf of the fund in connection with investment decisions, portfolio company governance, and the retention of advisors, including Calderwood & Harkness.

3. Investment Advisor / Manager

The investment advisor and manager of HPE Fund IV is Harrowgate Capital Advisors LLC, a Delaware limited liability company (EIN 83-2756891), which provides investment advisory services to the fund and manages the fund's day-to-day operations. The key principals of Harrowgate Capital Advisors LLC relevant to this engagement are as follows:

• Marcus Adler — Founding Partner & Chairman. Mr. Adler has ultimate oversight responsibility for the firm's investment activities and participated in certain key strategic discussions regarding the Spin-Off.

• Diana Fenn — Managing Partner & Chief Investment Officer. Ms. Fenn also serves as Chair of the Board of Directors of Veldran Industries Holdings, Inc. She was actively involved in the development and evaluation of the Spin-Off concept and participated in the August 15, 2022 conference call.

• Tobias Rourke — Partner, Head of Portfolio Operations. Mr. Rourke was responsible for coordinating the operational and business aspects of the proposed separation and participated in the August 15, 2022 conference call.

• Christine Yeung — General Counsel. Ms. Yeung served as the primary client contact for this engagement, coordinating information flow between Harrowgate, Veldran management, Whitfield & Gage LLP, and Calderwood & Harkness.

4. Portfolio Company (Distributing Corporation)

Veldran Industries Holdings, Inc. is a Delaware corporation (EIN 86-1920347) incorporated on March 14, 2019. Its registered address is 1209 Orange Street, Wilmington, Delaware 19801. Its principal office is located at 2400 Commerce Park Drive, Suite 500, Charlotte, North Carolina 28217. Veldran is a diversified industrial company operating in two principal business segments: the Engineered Coatings Division and the Precision Flow Solutions Division. The key members of Veldran management relevant to this engagement are:

• Jonathan Caldecott — Chief Executive Officer.

• Rita Subramanian — Chief Financial Officer.

• Philip Crundell — General Counsel and Corporate Secretary.

5. HPE Fund IV Ownership of Veldran

HPE Fund IV holds approximately 62.4% of the outstanding common stock of Veldran, representing 46,488,000 of 74,500,000 shares of Veldran common stock outstanding. HPE Fund IV's shares are held through Harrowgate Veldran Holdings LLC (EIN 86-1483920), a Delaware limited liability company that is a wholly owned subsidiary of HPE Fund IV. Harrowgate Veldran Holdings LLC was formed for the sole purpose of holding the Veldran equity investment and is treated as a disregarded entity for federal income tax purposes.

6. Controlled Corporation (SpinCo)

Meridian Flow Technologies, Inc. was the planned name for the controlled corporation that would receive the assets and liabilities of the Precision Flow Solutions Division and whose common stock would be distributed to Veldran shareholders in the Spin-Off. Meridian was planned as a Delaware corporation but had not yet been incorporated as of the date of dormancy. The planned principal office for Meridian was 7100 Northlake Parkway, Suite 300, Tucker, Georgia 30084. The planned senior management team for Meridian included:

• Sandra Waverly — Planned Chief Executive Officer. Ms. Waverly currently serves as President of the Precision Flow Solutions Division of Veldran.

• Derek Okonkwo — Planned Chief Financial Officer. Mr. Okonkwo currently serves as Vice President of Finance for the Precision Flow Solutions Division of Veldran.

7. Other Significant Shareholders of Veldran

The other significant shareholders of Veldran relevant to this engagement are as follows:

• Prescott Capital Management LP (Managing Partner: Andrew Kessler) — holder of approximately 14.8% of the outstanding Veldran common stock (11,026,000 shares). Prescott initially acquired 15,500,000 shares at $40.00 per share as a co-investor alongside HPE Fund IV in September 2019, and subsequently sold 4,474,000 shares in a secondary offering, reducing its stake to its current level. Prescott is separately advised on tax matters by Dunmore Havens & Associates LLC.

• Veldran management stockholders — collectively hold approximately 5.3% of the outstanding Veldran common stock (3,948,500 shares), consisting of shares acquired pursuant to management equity incentive plans implemented following the September 2019 change of control.

• Remaining public/institutional float — approximately 17.5% of the outstanding Veldran common stock (13,037,500 shares).

B. Engagement Opening

The engagement letter for this matter was executed on April 11, 2022, and assigned Engagement Number 1003-00005 and Matter Code HRW-SPIN-001. The engagement letter was signed on behalf of the client by Christine Yeung, General Counsel of Harrowgate Capital Advisors LLC, in her capacity as authorized representative of Harrowgate Private Equity Fund IV, L.P.

Leonard Cross was designated as the Responsible Partner for this engagement. Sylvia Hartwell was designated as the Billing Partner. The engagement team consisted of the following timekeepers:

• Leonard Cross — Partner, Tax Department. Mr. Cross is a senior partner in the firm's Tax Department with extensive experience in tax-free reorganizations and spin-off transactions. He served as the primary relationship partner and was responsible for overall supervision of the engagement and for all communications with the client on substantive tax issues.

• Sylvia Hartwell — Partner, Tax Department. Ms. Hartwell served as Billing Partner and provided substantive review and commentary on the draft tax opinion and certain of the supporting analysis memoranda. Ms. Hartwell's practice focuses on federal income tax aspects of private equity transactions.

• Garrett Simmons — Senior Associate (6th year), Tax Department. Mr. Simmons served as Lead Associate and was responsible for the day-to-day management of the engagement, including preparation of all analysis memoranda, the draft tax opinion letter, the draft Representation Letter, the diligence tracker, and coordination with Whitfield & Gage and Veldran management.

• Leila Nazari — Associate (3rd year), Tax Department. Ms. Nazari served as Working Associate and was responsible for research and drafting support on the analysis memoranda, particularly the Section 355(b) active trade or business analysis, the Section 355(d) disqualified distribution analysis, and the state and local tax considerations summary.

The scope of the engagement, as set forth in the engagement letter, was to render a "should" level tax opinion addressing the following provisions of the Code:

• IRC § 355(a) — requirements for tax-free distribution of stock of a controlled corporation;

• IRC § 355(b) — active trade or business requirement;

• IRC § 355(d) — disqualified distribution rules (recognition of gain on certain distributions of stock acquired in a purchase);

• IRC § 355(e) — recognition of gain on certain distributions of stock to persons in connection with acquisitions;

• IRC § 355(g) — distribution of stock of a controlled corporation involving a disqualified investment corporation; and

• IRC § 368(a)(1)(D) — qualification of the Contribution as a divisive reorganization.

The opinion was to address the proposed pro rata distribution by Veldran of one hundred percent (100%) of the common stock of Meridian to the Veldran shareholders at a ratio of one share of Meridian common stock for each share of Veldran common stock outstanding (a 1:1 distribution ratio).

As specified in the engagement letter and confirmed during the April 18, 2022 kick-off call, no application for a private letter ruling from the Internal Revenue Service was to be sought in connection with the Spin-Off. The Calderwood & Harkness tax opinion was intended to serve as the sole source of tax assurance for the transaction. This approach is consistent with market practice for spin-off transactions in recent years, but it placed heightened significance on the thoroughness and defensibility of the analysis underlying the opinion and on the completeness of the factual representations to be provided by the client and Veldran management.

The estimated fee range for the engagement, as set forth in the engagement letter, was $850,000 to $1,200,000, to be billed on an hourly basis in accordance with the firm's standard billing practices. The engagement letter did not provide for a fee cap, a fixed fee, or a success-based fee component.

C. Other Advisors Involved

The following other advisors were involved in the proposed Spin-Off and were known to Calderwood & Harkness in connection with this engagement:

Whitfield & Gage LLP — 51 West 52nd Street, New York, New York 10019. Whitfield & Gage served as lead corporate and M&A counsel to Harrowgate in connection with the proposed Spin-Off. Key contacts at Whitfield & Gage included Nathan Whitfield (Senior Partner and the Harrowgate relationship partner), Priya Chandrasekar (Partner and lead corporate counsel on the Spin-Off), and Ross Halverson (Counsel, providing drafting and diligence support). Ms. Chandrasekar was Calderwood & Harkness's primary counterpart at Whitfield & Gage for coordination of transaction structure, documentation, and timing. Whitfield & Gage was responsible for the corporate structuring and documentation aspects of the Spin-Off, including the Separation and Distribution Agreement, the Transition Services Agreement, the Employee Matters Agreement, and coordination with the SEC on any required filings. Calderwood & Harkness collaborated with Whitfield & Gage on the Tax Matters provisions for the Separation Agreement and the Tax Sharing Agreement.

Thornapple McCord LLP — 227 West Trade Street, Suite 2000, Charlotte, North Carolina 28202. Thornapple McCord served as separate corporate counsel to Veldran. Key contacts included Elaine Thornapple (Founding Partner) and David Ochoa (Partner and lead counsel for Veldran on the Spin-Off). Thornapple McCord represented Veldran's independent interests in the Spin-Off, distinct from Harrowgate's interests, and provided Veldran Board-level advice.

Brackenridge & Co. — 383 Madison Avenue, New York, New York 10179. Brackenridge & Co. served as financial advisor to Harrowgate and to the Veldran Board of Directors in connection with the proposed Spin-Off. Key contact: Samuel Ng, Managing Director, Industrials Group. Brackenridge & Co. provided preliminary valuation analysis of the Precision Flow Solutions Division (and by extension Meridian) and was expected to deliver a fairness opinion in connection with the Distribution. Brackenridge's preliminary valuation ranges, received on June 10, 2022, were used in Calderwood & Harkness's analysis of the estimated built-in gain and the potential tax exposure under various scenarios.

Pemberton Rathbone LLP — One PPG Place, Suite 1600, Pittsburgh, Pennsylvania 15222. Pemberton Rathbone served as independent auditors and tax-return preparers for Veldran. Key contacts: Lisa Engstrom (Partner, Audit & Assurance) and Harold Weiss (Partner, Tax). Pemberton Rathbone was a source of historical financial and tax return data in connection with Calderwood & Harkness's diligence review. Calderwood & Harkness coordinated with Harold Weiss on certain historical tax position questions, particularly relating to Veldran's adjusted tax basis in the assets of the Precision Flow Solutions Division.

Ashfield National Bank, N.A. — 100 Federal Street, Boston, Massachusetts 02110. Ashfield National Bank served as administrative agent under Veldran's First Lien Term Loan B, an institutional term loan facility with an aggregate principal amount of approximately $1.1 billion. Key contact: Margaret Tsao, Managing Director, Leveraged Finance. The credit agreement governing the Term Loan B was relevant to the Spin-Off because the proposed distribution of Meridian stock and the transfer of assets to Meridian could trigger covenants and require lender consent, amendment, or refinancing.

Colton Trust Company — 10 South LaSalle Street, Chicago, Illinois 60603. Colton Trust Company served as trustee under the indenture governing Veldran's 6.250% Senior Unsecured Notes due 2027, with an aggregate principal amount of $450 million. The indenture contained asset-sale covenants that were relevant to the Spin-Off structure, and Calderwood & Harkness reviewed the indenture provisions as part of the overall transactional analysis.

Dunmore Havens & Associates LLC — 590 Madison Avenue, 20th Floor, New York, New York 10022. Dunmore Havens served as tax advisor to Prescott Capital Management LP (the minority shareholder of Veldran). Key contact: Irene Salcedo, Principal. Calderwood & Harkness did not have a direct advisory relationship with Prescott or Dunmore Havens, but was aware of their role and had certain indirect communications through Whitfield & Gage regarding Prescott's tax considerations in the context of the Spin-Off.

D. Proposed Transaction Summary

The proposed Spin-Off was structured as a two-step, integrated transaction:

Step 1 — The Contribution: Veldran would contribute all of the assets, properties, and rights comprising the Precision Flow Solutions Division (including, without limitation, all tangible and intangible assets, contracts, intellectual property, permits, and working capital associated with that business) to Meridian Flow Technologies, Inc. (SpinCo), a newly formed Delaware corporation and wholly owned subsidiary of Veldran. In exchange, Meridian would issue to Veldran one hundred percent (100%) of the outstanding common stock of Meridian and would assume certain allocated liabilities of the Precision Flow Solutions Division (including certain trade payables, contractual obligations, environmental liabilities, and a portion of debt to be allocated in connection with the separation). The Contribution was intended to qualify as a reorganization within the meaning of IRC § 368(a)(1)(D).

Step 2 — The Distribution: Immediately following the Contribution, Veldran would distribute all of the Meridian common stock received in the Contribution to the holders of Veldran common stock on a pro rata basis at a distribution ratio of one (1) share of Meridian common stock for each one (1) share of Veldran common stock outstanding as of the record date. The Distribution was intended to qualify as a tax-free distribution within the meaning of IRC § 355(a).

Together, the Contribution and the Distribution were referred to as the "Spin-Off."

The intended federal income tax treatment of the Spin-Off was as follows:

(i) The Contribution would constitute a tax-free reorganization under IRC § 368(a)(1)(D), and no gain or loss would be recognized by Veldran or Meridian in connection therewith (subject to certain exceptions for "boot" and for liabilities in excess of basis);

(ii) The Distribution would constitute a tax-free distribution under IRC § 355(a), and no gain or loss would be recognized by Veldran or by the Veldran shareholders in connection therewith (subject to analysis under IRC §§ 355(d), 355(e), and 355(g));

(iii) Each Veldran shareholder would allocate its existing tax basis in its Veldran common stock between the Veldran common stock retained and the Meridian common stock received, based on the relative fair market values of each immediately following the Distribution; and

(iv) Each Veldran shareholder's holding period in the Meridian common stock received would include the shareholder's holding period in the corresponding Veldran common stock surrendered.

Target Timeline: The originally contemplated timeline called for both the record date and the distribution date to occur in the fourth quarter of 2022 (Q4 2022). This timeline was aggressive given the volume of remaining work and the unresolved issues described in Section III below.

Veldran Business Segments: Veldran operates two principal business segments, each of which constitutes a trade or business for purposes of the IRC § 355(b) active trade or business requirement:

• Engineered Coatings Division — This division, which was to remain with Veldran following the Spin-Off (i.e., Veldran would continue as the distributing corporation holding the Engineered Coatings business), reported fiscal year 2021 revenue of approximately $1.52 billion and fiscal year 2021 EBITDA of approximately $285 million, representing an EBITDA margin of approximately 18.75%. The Engineered Coatings Division manufactures high-performance industrial coatings, surface treatments, and thermal barrier products for the aerospace, energy, and heavy equipment markets.

• Precision Flow Solutions Division — This division, which was to be contributed to Meridian and spun off, reported fiscal year 2021 revenue of approximately $820 million and fiscal year 2021 EBITDA of approximately $133 million, representing an EBITDA margin of approximately 16.22%. The Precision Flow Solutions Division designs, manufactures, and services precision flow control equipment, including valves, actuators, and fluid handling systems, for the oil and gas, chemical, water treatment, and industrial process markets.

Veldran Aggregate Financials: On a consolidated basis, Veldran reported fiscal year 2021 revenue of approximately $2.34 billion and fiscal year 2021 EBITDA of approximately $418 million.

Estimated Fair Market Value of Meridian: Based on the preliminary analysis prepared by Brackenridge & Co. and received by Calderwood & Harkness on June 10, 2022, the estimated fair market value of Meridian (and by extension, of the Precision Flow Solutions Division assets) was in the range of approximately $1.4 billion to $1.7 billion. This range was derived by applying EV/EBITDA multiples of 10.5× to 12.8× to the Division's fiscal year 2021 EBITDA of approximately $133 million, with adjustments for net debt, working capital, and other factors. The midpoint of this range was approximately $1.55 billion.

Veldran's Estimated Adjusted Tax Basis in Precision Flow Division Assets: Based on information provided by Veldran management and Pemberton Rathbone, Veldran's estimated adjusted tax basis in the assets comprising the Precision Flow Solutions Division was approximately $800 million, resulting in estimated built-in gain on the Meridian stock (for purposes of the Section 355(e) exposure analysis and other gain recognition analyses) of approximately $600 million to $900 million (calculated as $1,396.5 million to $1,702.4 million estimated fair market value minus approximately $800 million adjusted tax basis).

Capital Structure of Veldran: As of the relevant date, Veldran's capital structure consisted of the following:

• Common Stock: 100,000,000 shares authorized; 74,500,000 shares issued and outstanding.

• First Lien Term Loan B: Approximately $1.1 billion in aggregate principal amount, with Ashfield National Bank, N.A. serving as administrative agent for the syndicate of institutional lenders.

• 6.250% Senior Unsecured Notes due 2027: $450 million in aggregate principal amount, issued under an indenture with Colton Trust Company serving as trustee.

E. Key Historical Transactions

Two historical transactions are of particular significance to the tax analysis of the proposed Spin-Off:

1. Kestrel Acquisition (June 7, 2019)

On June 7, 2019, Veldran acquired Kestrel Precision Controls, Inc. ("Kestrel"), a Georgia corporation (EIN 58-2847193, founded February 12, 2003), from Rennick Industrial Partners Fund II LP (EIN 82-3017564) for $295 million in an all-cash taxable stock acquisition. Kestrel was a manufacturer of precision flow control valves and actuators, and at the time of acquisition, Kestrel comprised approximately 35% of the Precision Flow Solutions Division's revenue. The Kestrel business was integrated into the Precision Flow Solutions Division following the acquisition.

The Kestrel acquisition is relevant to the IRC § 355(b)(2)(C) and (D) analysis because it involves the acquisition of a trade or business (or the stock of a corporation conducting a trade or business) by purchase within the five-year period ending on the date of distribution. Under IRC § 355(b)(2)(C), a trade or business is not treated as meeting the active trade or business requirement if it was acquired by the distributing corporation in a taxable transaction within the five-year period. Similarly, IRC § 355(b)(2)(D) applies to acquisitions of stock of a corporation conducting a trade or business within the five-year period. The Kestrel acquisition, having occurred on June 7, 2019, would fall within the five-year look-back period measured from a Q4 2022 distribution date. Calderwood & Harkness's Section 355(b) analysis memorandum (dated June 1, 2022) identified and analyzed this issue, concluding preliminarily that the Kestrel business was sufficiently integrated into the broader Precision Flow Solutions Division such that the Division's active trade or business had been conducted directly by Veldran (or its predecessor) for a period in excess of five years prior to the distribution, and that the Kestrel acquisition was an expansion of an existing trade or business rather than the acquisition of a separate trade or business. However, this analysis was based on a preliminary factual record and was subject to further refinement.

2. HPE Fund IV Acquisition of Veldran (September 20, 2019)

On September 20, 2019, HPE Fund IV acquired 62.4% of the outstanding common stock of Veldran (46,488,000 shares at $40.00 per share, for a total purchase price of $1,859,520,000) through a negotiated tender offer followed by a short-form merger squeeze-out of the prior controlling shareholder, Greystone Partners Fund III LP (EIN 81-2683910). The acquisition was funded by HPE Fund IV equity capital of approximately $1.24 billion and co-investment from Prescott Capital Management LP of approximately $620 million (15,500,000 shares at $40.00 per share). Prescott subsequently sold 4,474,000 shares in a secondary offering, reducing its holdings to 11,026,000 shares (approximately 14.8% of the outstanding common stock).

This acquisition is relevant to two critical provisions of the Code:

• IRC § 355(e) Plan Analysis: HPE Fund IV's September 2019 acquisition of a 62.4% controlling interest in Veldran constituted a change of control. Under IRC § 355(e), if the Spin-Off and the HPE Fund IV acquisition are treated as part of a "plan (or series of related transactions)," Veldran would be required to recognize gain on the distribution of Meridian stock. The temporal gap between the acquisition (September 20, 2019) and the anticipated distribution (Q4 2022) is approximately three years, which, while significant, does not benefit from any bright-line statutory safe harbor. The regulations under Section 355(e) employ a facts-and-circumstances test with various presumptions that require careful factual analysis. This issue is discussed further in Section III.B below.

• IRC § 355(d) Disqualified Distribution Analysis: Under IRC § 355(d), if immediately after the distribution any person holds "disqualified stock" in either the distributing or controlled corporation that constitutes a 50-percent-or-greater interest, the distributing corporation recognizes gain. "Disqualified stock" includes stock acquired by purchase within the five-year period ending on the date of distribution. HPE Fund IV's September 2019 acquisition of Veldran stock was a purchase, and the five-year period from September 20, 2019 would not have expired by the anticipated Q4 2022 distribution date. The Section 355(d) analysis memorandum (dated July 8, 2022) concluded preliminarily that Section 355(d) should not apply because the Spin-Off was structured as a pro rata distribution and HPE Fund IV would hold the same proportionate interest in both Veldran and Meridian following the distribution; however, the analysis involved certain technical complexities that warranted continued attention.

III. Reasons for Dormancy

The client's decision to pause the proposed Spin-Off indefinitely, and the corresponding decision to mark this matter dormant, was the product of multiple converging factors. While the immediate catalyst was the client's business judgment regarding market conditions and timing, the decision was significantly influenced by unresolved legal and factual issues that Calderwood & Harkness had identified as impediments to the delivery of a "should" level tax opinion. The principal factors are discussed below.

A. Business Purpose Weakness

IRC § 355 requires that a distribution of stock of a controlled corporation be motivated by one or more substantial, bona fide, corporate-level business purposes. Treasury Regulation § 1.355-2(b)(1) provides that Section 355 applies to a distribution only if it is carried out for "one or more corporate business purposes." A distribution that is motivated solely by a shareholder-level purpose, such as personal tax planning or liquidity objectives of a controlling shareholder, does not satisfy this requirement. Treasury Regulation § 1.355-2(b)(2) further provides that a corporate business purpose requires "a real and substantial non Federal tax purpose germane to the business of the distributing corporation, the controlled corporation, or the affiliated group."

In the course of this engagement, two preliminary corporate-level business purposes were identified by the client and Veldran management to support the proposed Spin-Off:

(i) Independent Capital Allocation: The separation of the Engineered Coatings Division and the Precision Flow Solutions Division into two independent public companies would enable each business to pursue capital-allocation strategies tailored to its distinct growth profile, capital intensity, and competitive dynamics, free from the constraints of competing for resources within a combined enterprise.

(ii) Enhanced Management Focus and Operational Efficiency: The separation would allow the management teams of each business to focus exclusively on the operational priorities, customer requirements, and market opportunities specific to their respective industries, thereby enhancing accountability, responsiveness, and long-term value creation.

Calderwood & Harkness identified a significant concern with these articulated purposes. The concern was first raised in the Business Purpose Memorandum dated July 18, 2022, which was prepared by Garrett Simmons and reviewed by Leonard Cross. The substance of the concern was communicated to the client by Leonard Cross in an email to Christine Yeung dated July 22, 2022.

The concern was as follows: both of the articulated business purposes, as currently framed and supported by the factual record developed to date, could be characterized as primarily serving the fund-level objectives of HPE Fund IV — specifically, the objective of returning capital to HPE Fund IV's limited partners and facilitating the monetization of HPE Fund IV's investment in Veldran — rather than serving genuine corporate-level interests of Veldran as an operating company. In particular:

• The "independent capital allocation" rationale appeared to be driven, at its core, by HPE Fund IV's desire to create a separately traded security (Meridian common stock) that could be more easily monetized or distributed to HPE Fund IV's limited partners, rather than by any demonstrated need of either business segment for a different capital allocation approach that could not be achieved within the existing corporate structure.

• The "management focus and operational efficiency" rationale, while facially reasonable, was not well supported by evidence that the combined structure was creating material operational inefficiencies or management distractions. Veldran management had not identified specific instances in which the combined structure had caused the loss of business opportunities, customer relationships, or operational performance.

This concern was underscored during a conference call held on August 15, 2022, which was attended by Leonard Cross, Sylvia Hartwell, and Garrett Simmons from Calderwood & Harkness; Christine Yeung, Marcus Adler, Diana Fenn, and Tobias Rourke from Harrowgate; Jonathan Caldecott and Philip Crundell from Veldran; and Priya Chandrasekar from Whitfield & Gage. During this call, Veldran's Chief Executive Officer, Jonathan Caldecott, was asked to articulate in specific terms the corporate-level business purposes that would be served by the Spin-Off. Mr. Caldecott had difficulty articulating business purposes that were independent of HPE Fund IV's strategic investment objectives. While Mr. Caldecott acknowledged in general terms that separation could benefit each business, his responses repeatedly circled back to the benefits of the transaction from Harrowgate's perspective as an investor seeking liquidity.

Calderwood & Harkness advised the client, both in the July 22, 2022 email and during the August 15, 2022 call, that a business purpose driven primarily by the private equity sponsor's liquidity needs or fund-level monetization objectives would be vulnerable to challenge by the Internal Revenue Service. The IRS has historically scrutinized spin-off transactions involving private equity sponsors to determine whether the distribution is genuinely motivated by corporate-level business purposes or is instead a mechanism for the sponsor to monetize its investment on a tax-free basis. Calderwood & Harkness further advised that, on the facts as currently developed, the firm would not be in a position to render a "should" level tax opinion that the business purpose requirement of IRC § 355 and Treasury Regulation § 1.355-2(b) was satisfied.

This issue was not resolved at the time of dormancy and constituted the principal impediment to the completion of the tax opinion. Resolving this issue would require either: (a) the development of additional facts demonstrating genuine, substantial, corporate-level business purposes independent of HPE Fund IV's fund-level objectives, supported by contemporaneous documentation and management testimony; or (b) a material restructuring of the narrative supporting the Spin-Off.

B. § 355(e) Plan Risk

IRC § 355(e) provides that if a distribution that otherwise qualifies under Section 355 is "part of a plan (or series of related transactions)" pursuant to which one or more persons acquire, directly or indirectly, stock representing a fifty-percent-or-greater interest (by vote or value) in the distributing corporation or any controlled corporation, the distributing corporation shall recognize gain on the distribution as if the stock of the controlled corporation distributed were sold for its fair market value on the date of distribution.

HPE Fund IV acquired its 62.4% stake in Veldran on September 20, 2019, which constituted a change of control. The temporal gap between the September 2019 acquisition and the anticipated Q4 2022 distribution date is approximately three years. Under the regulations promulgated under IRC § 355(e), specifically Treasury Regulation § 1.355-7, there is no bright-line statutory safe harbor that applies at exactly three years. The regulations employ a presumption framework that examines whether the distribution and the acquisition were part of a "plan" based on a series of factors, including (but not limited to):

• whether there were discussions, negotiations, or agreements regarding the distribution (or a similar transaction) at or before the time of the acquisition;

• whether the distribution was foreseeable at the time of the acquisition;

• the extent to which the acquisition was motivated by the possibility of a subsequent distribution;

• the length of time between the acquisition and the distribution;

• whether the acquiring person participated in or facilitated the distribution; and

• the extent to which the economic benefits of the distribution are captured by the acquirer.

The first draft of the Section 355(e) plan analysis memorandum, completed on June 28, 2022, reached a preliminary conclusion that the HPE Fund IV acquisition and the proposed Spin-Off should not be treated as part of a plan within the meaning of IRC § 355(e) and the regulations thereunder, based on the following factors: (i) the three-year temporal gap, while not dispositive, was substantial; (ii) the Calderwood & Harkness team was not aware of any evidence that the possibility of a spin-off was discussed or contemplated in connection with the September 2019 acquisition; and (iii) the decision to explore the Spin-Off appeared to have been made in late 2021 or early 2022, more than two years after the acquisition.

However, the factual record supporting the absence of pre-acquisition discussions about a potential spin-off was thin and required reinforcement. Specifically, Calderwood & Harkness had requested (in the second draft of the Representation Letter, circulated on July 11, 2022) that Harrowgate and Veldran provide formal, executed representations confirming that:

(a) at the time of the September 2019 acquisition, neither HPE Fund IV, Harrowgate Capital Advisors, nor any of their respective officers, directors, or investment professionals had discussed, considered, or proposed a spin-off, split-off, or other disposition of the Precision Flow Solutions Division;

(b) the decision to explore a spin-off of the Precision Flow Solutions Division was first discussed internally at Harrowgate no earlier than the fourth quarter of 2021;

(c) no pre-acquisition due diligence materials, investment committee memoranda, or similar documents prepared in connection with the September 2019 acquisition referenced or contemplated a potential spin-off or separation of any Veldran business segment; and

(d) no agreements, understandings, or arrangements, whether formal or informal, existed at the time of the acquisition regarding the disposition or separation of any Veldran business segment.

These representations had not been finalized or executed at the time of dormancy. The second draft of the Representation Letter was circulated to Christine Yeung and Priya Chandrasekar on July 11, 2022, but no executed version was returned. Calderwood & Harkness had received informal verbal assurances from Ms. Yeung that the representations were factually accurate, but verbal assurances are insufficient to support a "should" level tax opinion on this issue. The formal, executed representations are essential to establishing the factual predicate for the Section 355(e) analysis.

The magnitude of the potential tax exposure if Section 355(e) were to apply is substantial. Veldran would be required to recognize gain on the distribution of Meridian stock in an amount equal to the excess of the fair market value of the Meridian stock over Veldran's adjusted tax basis in such stock. Based on the Brackenridge & Co. preliminary valuation range and the estimated adjusted tax basis, the estimated built-in gain is between $596.5 million and $902.4 million. At the applicable 21% corporate income tax rate, the estimated federal income tax liability that would be triggered by a Section 355(e) determination would be in the range of approximately $125.3 million to $189.5 million. State income tax liabilities could add materially to this exposure, depending on the applicable apportionment factors.

The combination of the incomplete factual record, the absence of executed representations, and the magnitude of the potential tax exposure constituted a meaningful risk factor that contributed both to Calderwood & Harkness's inability to finalize the tax opinion and to the client's decision to pause the Spin-Off.

C. Deteriorating Market Conditions

During mid-2022, equity valuations in the industrial sector declined materially in response to rising interest rates, inflation concerns, supply chain disruptions, and broader macroeconomic uncertainty. The S&P 500 Industrials Index experienced significant downward pressure during this period, and comparable public company multiples for precision flow control and industrial equipment companies compressed substantially from their 2021 peaks. These market developments reduced the attractiveness of a spin-off from a valuation and monetization perspective, as the implied valuation of Meridian as a standalone public company would be lower than previously anticipated, and the opportunity for HPE Fund IV to realize attractive returns through a post-spin monetization event (whether by secondary offering, block trade, or other disposition) would be diminished.

Marcus Adler, Harrowgate's Founding Partner and Chairman, expressed this concern directly during the August 15, 2022 conference call. Mr. Adler stated that current market conditions made the timing of a spin-off and any potential post-spin monetization of HPE Fund IV's Meridian stake unattractive, and that it would not be prudent to proceed with the Spin-Off in the current market environment given the costs and complexity involved. Mr. Adler further noted that HPE Fund IV had no urgency to effect a distribution given the fund's remaining life and the availability of alternative value-realization strategies.

While market conditions are not a tax issue per se, and are not relevant to the analysis of whether the Spin-Off qualifies for tax-free treatment under IRC § 355, the deterioration in market conditions materially affected the client's willingness to invest the resources necessary to resolve the open tax issues, bear the costs of completing the transaction structure and documentation, and assume the residual tax risks associated with the Spin-Off. The client's business judgment that the timing was not right effectively eliminated the urgency that might otherwise have driven the resolution of the business purpose and Section 355(e) issues.

D. Lender Consent Uncertainty

Calderwood & Harkness's analysis of the debt instruments in Veldran's capital structure identified significant lender consent and covenant compliance issues that would need to be resolved before the Spin-Off could be consummated.

First Lien Term Loan B: Calderwood & Harkness's credit agreement spin-off covenant analysis memorandum (completed August 2, 2022) concluded that the proposed Spin-Off would likely constitute both a "Disposition" and an "Investment" under the defined terms of the credit agreement governing Veldran's First Lien Term Loan B (administrative agent: Ashfield National Bank, N.A.; aggregate principal amount: approximately $1.1 billion). The transfer of Precision Flow Solutions Division assets to Meridian would constitute a Disposition of such assets by Veldran, and the receipt of Meridian stock (prior to its distribution) could be characterized as an Investment. Under the credit agreement's restrictive covenants, these transactions would require either available capacity under the relevant negative covenant baskets or, if such capacity were insufficient, the consent of the required lenders. Preliminary discussions with Margaret Tsao of Ashfield National Bank indicated that the required basket capacity was not available and that the lender group would require significant negotiation regarding the terms of any consent or amendment, and would potentially require a refinancing of the Term Loan B — a process that would add substantial cost, complexity, and timeline risk to the transaction. Ms. Tsao further indicated that the lender group would likely require, as a condition of any consent, that Veldran retain the term loan obligation (rather than allocating a portion to Meridian) and that the credit agreement be amended to reflect the reduced asset base of Veldran following the Spin-Off, including potential additional collateral requirements and adjusted financial covenants.

6.250% Senior Unsecured Notes due 2027: Calderwood & Harkness's indenture spin-off covenant analysis memorandum (completed August 3, 2022) concluded that the distribution of Meridian stock could trigger the asset-sale covenant contained in the indenture governing Veldran's 6.250% Senior Unsecured Notes due 2027 (trustee: Colton Trust Company; aggregate principal amount: $450 million). The transfer of substantially all of the assets of the Precision Flow Solutions Division to Meridian, followed by the distribution of Meridian stock to shareholders, could be characterized as an asset sale (or deemed asset sale) under the indenture. If so characterized, Veldran would be required to comply with the indenture's asset-sale covenant, which included requirements for the application of net proceeds and potentially an offer to repurchase the notes. Alternatively, Veldran could seek a waiver or consent from the noteholders. The memorandum also noted that the indenture's asset-sale covenant contained a carve-out for certain spin-off transactions, but the carve-out appeared to require, among other conditions, that a tax opinion at a "should" level or higher be delivered confirming the tax-free nature of the Spin-Off — creating a circular dependency in which the ability to consummate the Spin-Off depended on the delivery of a tax opinion, and the delivery of the tax opinion depended on the resolution of the business purpose and Section 355(e) issues described above.

The combination of the First Lien Term Loan B consent requirements and the indenture covenant issues introduced additional transactional uncertainty and cost that further contributed to the client's decision to pause the Spin-Off. Neither the credit agreement consent/amendment process nor the indenture waiver process had been formally initiated at the time of dormancy.

IV. Status of Work Product at Dormancy

A. Timeline of Key Milestones

The following is a chronological summary of key milestones in the engagement from opening through dormancy:

B. Completed Work Product

The following work product was completed (in the sense of having been drafted to at least a first-draft stage) during the engagement and is preserved in the firm's document management system under Matter Code HRW-SPIN-001:

1. Comprehensive § 355 Analysis Memorandum — First draft, dated May 20, 2022. This memorandum provides an overview of all of the requirements for tax-free treatment under IRC § 355 and identifies the key issues and risk areas specific to the proposed Spin-Off. It served as the framework document for the more detailed issue-specific memoranda listed below.

2. § 355(b) Active Trade or Business Analysis Memorandum — Kestrel Issue — Dated June 1, 2022. This memorandum analyzes whether the Precision Flow Solutions Division satisfies the five-year active trade or business requirement under IRC § 355(b), with particular focus on the implications of the June 2019 Kestrel acquisition under IRC § 355(b)(2)(C) and (D).

3. Continuity of Interest / IRC § 368(a)(1)(D) Reorganization Analysis Memorandum — Dated June 15, 2022. This memorandum analyzes whether the Contribution qualifies as a reorganization under IRC § 368(a)(1)(D), including analysis of the continuity of interest and continuity of business enterprise requirements, the "substantially all" requirement under IRC § 354(b)(1)(A), and the distribution requirement under IRC § 354(b)(1)(B).

4. § 355(e) Plan Analysis Memorandum — First draft, dated June 28, 2022. This memorandum analyzes whether the proposed Spin-Off and the September 2019 HPE Fund IV acquisition constitute part of a "plan" under IRC § 355(e) and the regulations thereunder, including application of the safe harbors, presumptions, and factors set forth in Treasury Regulation § 1.355-7.

5. § 355(d) Disqualified Distribution Analysis Memorandum — Dated July 8, 2022. This memorandum analyzes whether the proposed Distribution would constitute a "disqualified distribution" under IRC § 355(d), focusing on whether any person would hold "disqualified stock" representing a 50-percent-or-greater interest in Veldran or Meridian immediately after the Distribution.

6. Business Purpose Memorandum — First draft, dated July 18, 2022. This memorandum evaluates the business purposes articulated for the Spin-Off against the requirements of Treasury Regulation § 1.355-2(b) and identifies the concerns regarding the potential characterization of the articulated purposes as primarily shareholder-level rather than corporate-level.

7. State and Local Tax Considerations Summary Memorandum — Dated July 20, 2022. This memorandum summarizes the state and local income, franchise, and transfer tax implications of the Spin-Off in key jurisdictions, including Delaware, North Carolina, Georgia, New York, and other states in which Veldran and the Precision Flow Solutions Division have significant operations or filing obligations.

8. Device Test Analysis Memorandum — Dated July 25, 2022. This memorandum analyzes whether the proposed Distribution would be "used principally as a device for the distribution of the earnings and profits of the distributing corporation, the controlled corporation, or both" within the meaning of IRC § 355(a)(1)(B) and Treasury Regulation § 1.355-2(d).

9. Draft Tax Matters Provisions for Separation Agreement — Dated July 28, 2022. These provisions were drafted for insertion into the Separation and Distribution Agreement being prepared by Whitfield & Gage and Thornapple McCord, and address the allocation of tax liabilities, tax indemnification, cooperation on tax matters, and restrictions on post-spin actions that could affect the tax-free nature of the Spin-Off.

10. Credit Agreement Spin-Off Covenant Analysis Memorandum — Dated August 2, 2022. This memorandum analyzes the restrictive covenants in the credit agreement governing Veldran's First Lien Term Loan B as they relate to the proposed Spin-Off.

11. Indenture Spin-Off Covenant Analysis Memorandum — Dated August 3, 2022. This memorandum analyzes the covenants in the indenture governing Veldran's 6.250% Senior Unsecured Notes due 2027 as they relate to the proposed Spin-Off.

12. Draft Tax Sharing Agreement — Outline and Key Terms — Dated August 4, 2022. This document sets forth an outline and summary of key terms for the proposed Tax Sharing Agreement between Veldran and Meridian, which would govern the allocation of pre-spin tax liabilities, the preparation and filing of pre-spin and straddle-period tax returns, and indemnification obligations.

13. First Draft Tax Opinion Letter — Dated August 5, 2022. This draft opinion letter was circulated to Christine Yeung and Priya Chandrasekar and was prominently marked as a draft not for reliance. It contains open placeholders, qualifications, and unresolved issues (including the business purpose issue and the Section 355(e) plan analysis). It reflects the state of the analysis as of its date and should not be treated as a final or near-final opinion.

14. Internal Comments Compilation on Draft Opinion — Dated August 10, 2022. This document compiles the comments and markup provided by Leonard Cross and Sylvia Hartwell on the first draft tax opinion letter. These comments were not incorporated into the draft prior to dormancy.

15. Representation Letter — First draft dated May 6, 2022; second draft (redline against first draft) dated July 11, 2022. The Representation Letter sets forth the factual representations to be provided by Veldran and Harrowgate in support of the tax opinion, including representations regarding business purposes, the Section 355(e) plan analysis, the active trade or business requirement, the absence of a device, and other factual predicates. The Representation Letter was not finalized or executed.

16. Tax Diligence Information Request Lists — Initial request dated April 25, 2022; supplemental Kestrel-specific request dated May 16, 2022. These documents itemize the information and documentation requested from Veldran management and its advisors in connection with Calderwood & Harkness's tax diligence review.

17. Diligence Tracker Spreadsheet — Last updated August 29, 2022. This spreadsheet tracks the status of all diligence items requested, received, and outstanding.

18. Conference Call Memoranda and Correspondence File — Includes memoranda summarizing key conference calls (including the April 18, 2022 kick-off call and the August 15, 2022 business purpose call) and all significant email correspondence among the engagement team, the client, and other advisors.

C. Outstanding / Incomplete Items

The following items were outstanding or incomplete at the time of dormancy and would need to be addressed if the matter is reactivated:

1. Business Purpose Articulation. The business purposes for the Spin-Off, as currently articulated, are insufficient to support a "should" level tax opinion. The concern described in Section III.A above — namely, that the articulated purposes are primarily driven by HPE Fund IV's fund-level objectives rather than genuine corporate-level interests of Veldran — was not resolved. Resolution would require either the development of additional facts demonstrating substantial corporate-level business purposes or a material restructuring of the rationale for the Spin-Off.

2. § 355(e) Factual Record. The factual representations confirming that no pre-September 2019 discussions, negotiations, or understandings regarding a potential spin-off or separation of the Precision Flow Solutions Division existed at or before the time of the HPE Fund IV acquisition were requested in the second draft of the Representation Letter (circulated July 11, 2022) but were not finalized or executed by Veldran or Harrowgate. The absence of these executed representations is a gap in the factual record that would need to be filled before the Section 355(e) plan analysis could be finalized.

3. Representation Letter. The second draft of the Representation Letter was circulated on July 11, 2022, but was not finalized or executed by Veldran or Harrowgate. Finalization of the Representation Letter is a prerequisite to the delivery of any tax opinion.

4. Tax Opinion. The first draft of the tax opinion letter was circulated on August 5, 2022, but it contains open placeholders and qualifications, and internal comments from Leonard Cross and Sylvia Hartwell (compiled August 10, 2022) have not been incorporated. The draft opinion is not in final form and should not be relied upon by any person for any purpose.

5. Tax Sharing Agreement. The Tax Sharing Agreement between Veldran and Meridian remains at the outline and key terms stage. A full-form agreement has not been drafted.

6. Outstanding Diligence Items. The diligence tracker spreadsheet, last updated August 29, 2022, reflects that certain items requested from Veldran management remain outstanding, including (without limitation):

(a) certain historical Veldran state income tax returns for the 2019 and 2020 tax years for several jurisdictions;

(b) detailed schedules and documentation of intercompany transactions between the Engineered Coatings Division and the Precision Flow Solutions Division, including intercompany pricing methodologies and transfer pricing documentation;

(c) a complete schedule of intellectual property assets to be transferred to Meridian, including registered patents, trademarks, and trade names, together with associated tax basis information; and

(d) supporting documentation for certain Section 338 election analyses considered (but apparently not made) in connection with the Kestrel acquisition.

7. Meridian Incorporation. Meridian Flow Technologies, Inc. (SpinCo) was never incorporated. No certificate of incorporation was filed, no shares of stock were issued, and no organizational resolutions were adopted. Incorporation of SpinCo is a prerequisite to the Contribution and Distribution.

8. Lender and Trustee Consents. Neither the credit agreement consent/amendment process with the Term Loan B lender group (through Ashfield National Bank) nor the indenture waiver/consent process with the Senior Unsecured Noteholders (through Colton Trust Company) was formally initiated. These processes would need to be commenced and completed before the Spin-Off could proceed.

V. Work Product Preservation Instructions

All memoranda, draft opinions, draft transaction documents (including the draft Representation Letter, draft Tax Matters provisions, and draft Tax Sharing Agreement outline), correspondence (including emails), diligence materials, the diligence tracker spreadsheet, conference call memoranda, time records, billing records, and all other materials relating to this engagement are to be preserved in the firm's document management system under Matter Code HRW-SPIN-001, Engagement Number 1003-00005. All documents should be organized by work product type and date in accordance with the firm's standard filing conventions for tax advisory matters.

Physical files, if any, are to be boxed, labeled with the matter code and engagement number, and stored in accordance with the firm's records retention policy, which generally requires retention of closed or dormant matter files for a period of not less than ten (10) years following the date of closure or dormancy, unless a longer retention period is required by applicable law or regulation or is otherwise specified by the engagement team.

The draft tax opinion letter (dated August 5, 2022) and all supporting analysis memoranda are attorney work product, protected by the attorney work product doctrine and, to the extent applicable, the attorney-client privilege. All such documents should be clearly and prominently marked as drafts, not for reliance, and should not be produced, disclosed, or made available to any person outside the firm without the prior written approval of the Responsible Partner, Leonard Cross.

Access to the matter within the firm's document management system should remain restricted to the members of the engagement team — Leonard Cross, Sylvia Hartwell, Garrett Simmons, and Leila Nazari — and to firm administration and records management personnel as necessary for file management and compliance purposes.

The matter may be reactivated at the client's request. The client, through Christine Yeung, has been informed of this possibility in a separate letter from Leonard Cross to Ms. Yeung dated August 29, 2022, which also confirms the dormancy of the matter, the preservation of work product, and the status of unbilled fees. Upon reactivation, the engagement team should review and update all work product to account for any intervening changes in law, regulations, IRS guidance, or facts.

VI. Billing and Financial Summary

A. Hourly Rates (2022)

The applicable hourly rates for the timekeepers on this engagement during the 2022 billing year are a

MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT FOR INTERNAL USE ONLY
CALDERWOOD & HARKNESS LLP 1301 Avenue of the Americas, 40th Floor New York, NY 10019
August 29, 2022
TO: File — Matter No. HRW-SPIN-001 (Engagement No. 1003-00005)
FROM: Garrett Simmons, Tax Department (Lead Associate)
REVIEWED AND APPROVED BY:
Leonard Cross, Partner, Tax Department (Responsible Partner)
Sylvia Hartwell, Partner, Tax Department (Billing Partner)
RE: Matter Status Change to Dormant — Harrowgate Private Equity Fund IV, L.P. / Veldran Industries Holdings, Inc. — Proposed Tax-Free Spin-Off of Meridian Flow Technologies, Inc.
Right-click to update Table of Contents
I. Purpose of Memorandum
This memorandum documents the decision to change the status of Matter No. HRW-SPIN-001 (Engagement No. 1003-00005) from "Active" to "Dormant," effective as of August 29, 2022. The matter is being designated as dormant rather than closed in order to preserve the possibility of reactivation at the client's election, and to ensure that all work product, diligence files, correspondence, and related materials are maintained in an organized and accessible manner in the firm's document management system.
The matter involved the rendering of a "should" level tax opinion under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), in connection with the proposed pro rata spin-off by Veldran Industries Holdings, Inc. ("Veldran" or the "Distributing Corporation") of one hundred percent (100%) of the common stock of Meridian Flow Technologies, Inc. ("Meridian" or "SpinCo") to the shareholders of Veldran on a pro rata basis (the "Spin-Off"). The Spin-Off was structured to consist of two integrated steps: (a) a contribution of all assets and liabilities of Veldran's Precision Flow Solutions Division to Meridian in exchange for all of the outstanding common stock of Meridian and the assumption by Meridian of certain allocated liabilities (the "Contribution"), followed immediately by (b) a pro rata distribution by Veldran of all Meridian common stock to the Veldran shareholders (the "Distribution").
The client in this engagement is Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV" or "Harrowgate"), a Delaware limited partnership. On August 22, 2022, Christine Yeung, General Counsel of Harrowgate Capital Advisors LLC (the investment advisor and manager of HPE Fund IV), informed Calderwood & Harkness LLP by email that Harrowgate had determined to pause the proposed Spin-Off indefinitely. Ms. Yeung's email did not characterize the decision as a termination of the transaction or of the engagement, but rather as an indefinite suspension, reflecting the possibility that the Spin-Off might be revisited at a future date should circumstances change. A copy of Ms. Yeung's email has been preserved in the correspondence file for this matter.
This memorandum sets forth:
(a) a summary of the engagement background, including identification of the client, the key parties, the engagement scope, the other advisors involved, and the proposed transaction structure;
(b) the reasons underlying the client's decision to pause the Spin-Off and Calderwood & Harkness's decision to mark the matter dormant, including the principal legal and factual impediments to completion of the tax opinion;
(c) the status of all work product at the time of dormancy, including a timeline of key milestones, a catalog of completed work product, and a summary of outstanding and incomplete items;
(d) instructions for the preservation and management of work product and files;
(e) a billing and financial summary, including hourly rates, hours and fees accrued, invoices rendered, and unbilled work-in-progress; and
(f) conclusions and recommendations regarding the matter going forward.
This memorandum is intended solely for internal use by the firm and constitutes attorney work product. It is not intended for distribution to the client or any third party. A separate formal letter addressed to Christine Yeung confirming the dormancy of the matter, the preservation of work product, and the status of unbilled fees is being transmitted concurrently with this memorandum.
II. Engagement Background
A. Client and Key Parties
1. Client. The client in this engagement is Harrowgate Private Equity Fund IV, L.P., a Delaware limited partnership formed under the Delaware Revised Uniform Limited Partnership Act. Harrowgate's Employer Identification Number is 84-3291067. Its registered address is 1209 Orange Street, Wilmington, Delaware 19801 (c/o Crowne Albany Corporation, as registered agent). Its principal office is located at 600 Lexington Avenue, 38th Floor, New York, New York 10022.
HPE Fund IV is a private equity fund with a vintage year of 2018 and a total committed capital of approximately $6.8 billion. The fund pursues control-oriented investments in middle-market and upper-middle-market industrial and specialty manufacturing companies.
2. General Partner
The general partner of HPE Fund IV is Harrowgate Capital Partners IV GP LLC, a Delaware limited liability company (EIN 84-3291104). As general partner, Harrowgate Capital Partners IV GP LLC has the authority to act on behalf of the fund in connection with investment decisions, portfolio company governance, and the retention of advisors, including Calderwood & Harkness.
3. Investment Advisor / Manager
The investment advisor and manager of HPE Fund IV is Harrowgate Capital Advisors LLC, a Delaware limited liability company (EIN 83-2756891), which provides investment advisory services to the fund and manages the fund's day-to-day operations. The key principals of Harrowgate Capital Advisors LLC relevant to this engagement are as follows:
• Marcus Adler — Founding Partner & Chairman. Mr. Adler has ultimate oversight responsibility for the firm's investment activities and participated in certain key strategic discussions regarding the Spin-Off.
• Diana Fenn — Managing Partner & Chief Investment Officer. Ms. Fenn also serves as Chair of the Board of Directors of Veldran Industries Holdings, Inc. She was actively involved in the development and evaluation of the Spin-Off concept and participated in the August 15, 2022 conference call.
• Tobias Rourke — Partner, Head of Portfolio Operations. Mr. Rourke was responsible for coordinating the operational and business aspects of the proposed separation and participated in the August 15, 2022 conference call.
• Christine Yeung — General Counsel. Ms. Yeung served as the primary client contact for this engagement, coordinating information flow between Harrowgate, Veldran management, Whitfield & Gage LLP, and Calderwood & Harkness.
4. Portfolio Company (Distributing Corporation)
Veldran Industries Holdings, Inc. is a Delaware corporation (EIN 86-1920347) incorporated on March 14, 2019. Its registered address is 1209 Orange Street, Wilmington, Delaware 19801. Its principal office is located at 2400 Commerce Park Drive, Suite 500, Charlotte, North Carolina 28217. Veldran is a diversified industrial company operating in two principal business segments: the Engineered Coatings Division and the Precision Flow Solutions Division. The key members of Veldran management relevant to this engagement are:
• Jonathan Caldecott — Chief Executive Officer.
• Rita Subramanian — Chief Financial Officer.
• Philip Crundell — General Counsel and Corporate Secretary.
5. HPE Fund IV Ownership of Veldran
HPE Fund IV holds approximately 62.4% of the outstanding common stock of Veldran, representing 46,488,000 of 74,500,000 shares of Veldran common stock outstanding. HPE Fund IV's shares are held through Harrowgate Veldran Holdings LLC (EIN 86-1483920), a Delaware limited liability company that is a wholly owned subsidiary of HPE Fund IV. Harrowgate Veldran Holdings LLC was formed for the sole purpose of holding the Veldran equity investment and is treated as a disregarded entity for federal income tax purposes.
6. Controlled Corporation (SpinCo)
Meridian Flow Technologies, Inc. was the planned name for the controlled corporation that would receive the assets and liabilities of the Precision Flow Solutions Division and whose common stock would be distributed to Veldran shareholders in the Spin-Off. Meridian was planned as a Delaware corporation but had not yet been incorporated as of the date of dormancy. The planned principal office for Meridian was 7100 Northlake Parkway, Suite 300, Tucker, Georgia 30084. The planned senior management team for Meridian included:
• Sandra Waverly — Planned Chief Executive Officer. Ms. Waverly currently serves as President of the Precision Flow Solutions Division of Veldran.
• Derek Okonkwo — Planned Chief Financial Officer. Mr. Okonkwo currently serves as Vice President of Finance for the Precision Flow Solutions Division of Veldran.
7. Other Significant Shareholders of Veldran
The other significant shareholders of Veldran relevant to this engagement are as follows:
• Prescott Capital Management LP (Managing Partner: Andrew Kessler) — holder of approximately 14.8% of the outstanding Veldran common stock (11,026,000 shares). Prescott initially acquired 15,500,000 shares at $40.00 per share as a co-investor alongside HPE Fund IV in September 2019, and subsequently sold 4,474,000 shares in a secondary offering, reducing its stake to its current level. Prescott is separately advised on tax matters by Dunmore Havens & Associates LLC.
• Veldran management stockholders — collectively hold approximately 5.3% of the outstanding Veldran common stock (3,948,500 shares), consisting of shares acquired pursuant to management equity incentive plans implemented following the September 2019 change of control.
• Remaining public/institutional float — approximately 17.5% of the outstanding Veldran common stock (13,037,500 shares).
B. Engagement Opening
The engagement letter for this matter was executed on April 11, 2022, and assigned Engagement Number 1003-00005 and Matter Code HRW-SPIN-001. The engagement letter was signed on behalf of the client by Christine Yeung, General Counsel of Harrowgate Capital Advisors LLC, in her capacity as authorized representative of Harrowgate Private Equity Fund IV, L.P.
Leonard Cross was designated as the Responsible Partner for this engagement. Sylvia Hartwell was designated as the Billing Partner. The engagement team consisted of the following timekeepers:
• Leonard Cross — Partner, Tax Department. Mr. Cross is a senior partner in the firm's Tax Department with extensive experience in tax-free reorganizations and spin-off transactions. He served as the primary relationship partner and was responsible for overall supervision of the engagement and for all communications with the client on substantive tax issues.
• Sylvia Hartwell — Partner, Tax Department. Ms. Hartwell served as Billing Partner and provided substantive review and commentary on the draft tax opinion and certain of the supporting analysis memoranda. Ms. Hartwell's practice focuses on federal income tax aspects of private equity transactions.
• Garrett Simmons — Senior Associate (6th year), Tax Department. Mr. Simmons served as Lead Associate and was responsible for the day-to-day management of the engagement, including preparation of all analysis memoranda, the draft tax opinion letter, the draft Representation Letter, the diligence tracker, and coordination with Whitfield & Gage and Veldran management.
• Leila Nazari — Associate (3rd year), Tax Department. Ms. Nazari served as Working Associate and was responsible for research and drafting support on the analysis memoranda, particularly the Section 355(b) active trade or business analysis, the Section 355(d) disqualified distribution analysis, and the state and local tax considerations summary.
The scope of the engagement, as set forth in the engagement letter, was to render a "should" level tax opinion addressing the following provisions of the Code:
• IRC § 355(a) — requirements for tax-free distribution of stock of a controlled corporation;
• IRC § 355(b) — active trade or business requirement;
• IRC § 355(d) — disqualified distribution rules (recognition of gain on certain distributions of stock acquired in a purchase);
• IRC § 355(e) — recognition of gain on certain distributions of stock to persons in connection with acquisitions;
• IRC § 355(g) — distribution of stock of a controlled corporation involving a disqualified investment corporation; and
• IRC § 368(a)(1)(D) — qualification of the Contribution as a divisive reorganization.
The opinion was to address the proposed pro rata distribution by Veldran of one hundred percent (100%) of the common stock of Meridian to the Veldran shareholders at a ratio of one share of Meridian common stock for each share of Veldran common stock outstanding (a 1:1 distribution ratio).
As specified in the engagement letter and confirmed during the April 18, 2022 kick-off call, no application for a private letter ruling from the Internal Revenue Service was to be sought in connection with the Spin-Off. The Calderwood & Harkness tax opinion was intended to serve as the sole source of tax assurance for the transaction. This approach is consistent with market practice for spin-off transactions in recent years, but it placed heightened significance on the thoroughness and defensibility of the analysis underlying the opinion and on the completeness of the factual representations to be provided by the client and Veldran management.
The estimated fee range for the engagement, as set forth in the engagement letter, was $850,000 to $1,200,000, to be billed on an hourly basis in accordance with the firm's standard billing practices. The engagement letter did not provide for a fee cap, a fixed fee, or a success-based fee component.
C. Other Advisors Involved
The following other advisors were involved in the proposed Spin-Off and were known to Calderwood & Harkness in connection with this engagement:
Whitfield & Gage LLP — 51 West 52nd Street, New York, New York 10019. Whitfield & Gage served as lead corporate and M&A counsel to Harrowgate in connection with the proposed Spin-Off. Key contacts at Whitfield & Gage included Nathan Whitfield (Senior Partner and the Harrowgate relationship partner), Priya Chandrasekar (Partner and lead corporate counsel on the Spin-Off), and Ross Halverson (Counsel, providing drafting and diligence support). Ms. Chandrasekar was Calderwood & Harkness's primary counterpart at Whitfield & Gage for coordination of transaction structure, documentation, and timing. Whitfield & Gage was responsible for the corporate structuring and documentation aspects of the Spin-Off, including the Separation and Distribution Agreement, the Transition Services Agreement, the Employee Matters Agreement, and coordination with the SEC on any required filings. Calderwood & Harkness collaborated with Whitfield & Gage on the Tax Matters provisions for the Separation Agreement and the Tax Sharing Agreement.
Thornapple McCord LLP — 227 West Trade Street, Suite 2000, Charlotte, North Carolina 28202. Thornapple McCord served as separate corporate counsel to Veldran. Key contacts included Elaine Thornapple (Founding Partner) and David Ochoa (Partner and lead counsel for Veldran on the Spin-Off). Thornapple McCord represented Veldran's independent interests in the Spin-Off, distinct from Harrowgate's interests, and provided Veldran Board-level advice.
Brackenridge & Co. — 383 Madison Avenue, New York, New York 10179. Brackenridge & Co. served as financial advisor to Harrowgate and to the Veldran Board of Directors in connection with the proposed Spin-Off. Key contact: Samuel Ng, Managing Director, Industrials Group. Brackenridge & Co. provided preliminary valuation analysis of the Precision Flow Solutions Division (and by extension Meridian) and was expected to deliver a fairness opinion in connection with the Distribution. Brackenridge's preliminary valuation ranges, received on June 10, 2022, were used in Calderwood & Harkness's analysis of the estimated built-in gain and the potential tax exposure under various scenarios.
Pemberton Rathbone LLP — One PPG Place, Suite 1600, Pittsburgh, Pennsylvania 15222. Pemberton Rathbone served as independent auditors and tax-return preparers for Veldran. Key contacts: Lisa Engstrom (Partner, Audit & Assurance) and Harold Weiss (Partner, Tax). Pemberton Rathbone was a source of historical financial and tax return data in connection with Calderwood & Harkness's diligence review. Calderwood & Harkness coordinated with Harold Weiss on certain historical tax position questions, particularly relating to Veldran's adjusted tax basis in the assets of the Precision Flow Solutions Division.
Ashfield National Bank, N.A. — 100 Federal Street, Boston, Massachusetts 02110. Ashfield National Bank served as administrative agent under Veldran's First Lien Term Loan B, an institutional term loan facility with an aggregate principal amount of approximately $1.1 billion. Key contact: Margaret Tsao, Managing Director, Leveraged Finance. The credit agreement governing the Term Loan B was relevant to the Spin-Off because the proposed distribution of Meridian stock and the transfer of assets to Meridian could trigger covenants and require lender consent, amendment, or refinancing.
Colton Trust Company — 10 South LaSalle Street, Chicago, Illinois 60603. Colton Trust Company served as trustee under the indenture governing Veldran's 6.250% Senior Unsecured Notes due 2027, with an aggregate principal amount of $450 million. The indenture contained asset-sale covenants that were relevant to the Spin-Off structure, and Calderwood & Harkness reviewed the indenture provisions as part of the overall transactional analysis.
Dunmore Havens & Associates LLC — 590 Madison Avenue, 20th Floor, New York, New York 10022. Dunmore Havens served as tax advisor to Prescott Capital Management LP (the minority shareholder of Veldran). Key contact: Irene Salcedo, Principal. Calderwood & Harkness did not have a direct advisory relationship with Prescott or Dunmore Havens, but was aware of their role and had certain indirect communications through Whitfield & Gage regarding Prescott's tax considerations in the context of the Spin-Off.
D. Proposed Transaction Summary
The proposed Spin-Off was structured as a two-step, integrated transaction:
Step 1 — The Contribution: Veldran would contribute all of the assets, properties, and rights comprising the Precision Flow Solutions Division (including, without limitation, all tangible and intangible assets, contracts, intellectual property, permits, and working capital associated with that business) to Meridian Flow Technologies, Inc. (SpinCo), a newly formed Delaware corporation and wholly owned subsidiary of Veldran. In exchange, Meridian would issue to Veldran one hundred percent (100%) of the outstanding common stock of Meridian and would assume certain allocated liabilities of the Precision Flow Solutions Division (including certain trade payables, contractual obligations, environmental liabilities, and a portion of debt to be allocated in connection with the separation). The Contribution was intended to qualify as a reorganization within the meaning of IRC § 368(a)(1)(D).
Step 2 — The Distribution: Immediately following the Contribution, Veldran would distribute all of the Meridian common stock received in the Contribution to the holders of Veldran common stock on a pro rata basis at a distribution ratio of one (1) share of Meridian common stock for each one (1) share of Veldran common stock outstanding as of the record date. The Distribution was intended to qualify as a tax-free distribution within the meaning of IRC § 355(a).
Together, the Contribution and the Distribution were referred to as the "Spin-Off."
The intended federal income tax treatment of the Spin-Off was as follows:
(i) The Contribution would constitute a tax-free reorganization under IRC § 368(a)(1)(D), and no gain or loss would be recognized by Veldran or Meridian in connection therewith (subject to certain exceptions for "boot" and for liabilities in excess of basis);
(ii) The Distribution would constitute a tax-free distribution under IRC § 355(a), and no gain or loss would be recognized by Veldran or by the Veldran shareholders in connection therewith (subject to analysis under IRC §§ 355(d), 355(e), and 355(g));
(iii) Each Veldran shareholder would allocate its existing tax basis in its Veldran common stock between the Veldran common stock retained and the Meridian common stock received, based on the relative fair market values of each immediately following the Distribution; and
(iv) Each Veldran shareholder's holding period in the Meridian common stock received would include the shareholder's holding period in the corresponding Veldran common stock surrendered.
Target Timeline: The originally contemplated timeline called for both the record date and the distribution date to occur in the fourth quarter of 2022 (Q4 2022). This timeline was aggressive given the volume of remaining work and the unresolved issues described in Section III below.
Veldran Business Segments: Veldran operates two principal business segments, each of which constitutes a trade or business for purposes of the IRC § 355(b) active trade or business requirement:
• Engineered Coatings Division — This division, which was to remain with Veldran following the Spin-Off (i.e., Veldran would continue as the distributing corporation holding the Engineered Coatings business), reported fiscal year 2021 revenue of approximately $1.52 billion and fiscal year 2021 EBITDA of approximately $285 million, representing an EBITDA margin of approximately 18.75%. The Engineered Coatings Division manufactures high-performance industrial coatings, surface treatments, and thermal barrier products for the aerospace, energy, and heavy equipment markets.
• Precision Flow Solutions Division — This division, which was to be contributed to Meridian and spun off, reported fiscal year 2021 revenue of approximately $820 million and fiscal year 2021 EBITDA of approximately $133 million, representing an EBITDA margin of approximately 16.22%. The Precision Flow Solutions Division designs, manufactures, and services precision flow control equipment, including valves, actuators, and fluid handling systems, for the oil and gas, chemical, water treatment, and industrial process markets.
Veldran Aggregate Financials: On a consolidated basis, Veldran reported fiscal year 2021 revenue of approximately $2.34 billion and fiscal year 2021 EBITDA of approximately $418 million.
Estimated Fair Market Value of Meridian: Based on the preliminary analysis prepared by Brackenridge & Co. and received by Calderwood & Harkness on June 10, 2022, the estimated fair market value of Meridian (and by extension, of the Precision Flow Solutions Division assets) was in the range of approximately $1.4 billion to $1.7 billion. This range was derived by applying EV/EBITDA multiples of 10.5× to 12.8× to the Division's fiscal year 2021 EBITDA of approximately $133 million, with adjustments for net debt, working capital, and other factors. The midpoint of this range was approximately $1.55 billion.
Veldran's Estimated Adjusted Tax Basis in Precision Flow Division Assets: Based on information provided by Veldran management and Pemberton Rathbone, Veldran's estimated adjusted tax basis in the assets comprising the Precision Flow Solutions Division was approximately $800 million, resulting in estimated built-in gain on the Meridian stock (for purposes of the Section 355(e) exposure analysis and other gain recognition analyses) of approximately $600 million to $900 million (calculated as $1,396.5 million to $1,702.4 million estimated fair market value minus approximately $800 million adjusted tax basis).
Capital Structure of Veldran: As of the relevant date, Veldran's capital structure consisted of the following:
• Common Stock: 100,000,000 shares authorized; 74,500,000 shares issued and outstanding.
• First Lien Term Loan B: Approximately $1.1 billion in aggregate principal amount, with Ashfield National Bank, N.A. serving as administrative agent for the syndicate of institutional lenders.
• 6.250% Senior Unsecured Notes due 2027: $450 million in aggregate principal amount, issued under an indenture with Colton Trust Company serving as trustee.
E. Key Historical Transactions
Two historical transactions are of particular significance to the tax analysis of the proposed Spin-Off:
1. Kestrel Acquisition (June 7, 2019)
On June 7, 2019, Veldran acquired Kestrel Precision Controls, Inc. ("Kestrel"), a Georgia corporation (EIN 58-2847193, founded February 12, 2003), from Rennick Industrial Partners Fund II LP (EIN 82-3017564) for $295 million in an all-cash taxable stock acquisition. Kestrel was a manufacturer of precision flow control valves and actuators, and at the time of acquisition, Kestrel comprised approximately 35% of the Precision Flow Solutions Division's revenue. The Kestrel business was integrated into the Precision Flow Solutions Division following the acquisition.
The Kestrel acquisition is relevant to the IRC § 355(b)(2)(C) and (D) analysis because it involves the acquisition of a trade or business (or the stock of a corporation conducting a trade or business) by purchase within the five-year period ending on the date of distribution. Under IRC § 355(b)(2)(C), a trade or business is not treated as meeting the active trade or business requirement if it was acquired by the distributing corporation in a taxable transaction within the five-year period. Similarly, IRC § 355(b)(2)(D) applies to acquisitions of stock of a corporation conducting a trade or business within the five-year period. The Kestrel acquisition, having occurred on June 7, 2019, would fall within the five-year look-back period measured from a Q4 2022 distribution date. Calderwood & Harkness's Section 355(b) analysis memorandum (dated June 1, 2022) identified and analyzed this issue, concluding preliminarily that the Kestrel business was sufficiently integrated into the broader Precision Flow Solutions Division such that the Division's active trade or business had been conducted directly by Veldran (or its predecessor) for a period in excess of five years prior to the distribution, and that the Kestrel acquisition was an expansion of an existing trade or business rather than the acquisition of a separate trade or business. However, this analysis was based on a preliminary factual record and was subject to further refinement.
2. HPE Fund IV Acquisition of Veldran (September 20, 2019)
On September 20, 2019, HPE Fund IV acquired 62.4% of the outstanding common stock of Veldran (46,488,000 shares at $40.00 per share, for a total purchase price of $1,859,520,000) through a negotiated tender offer followed by a short-form merger squeeze-out of the prior controlling shareholder, Greystone Partners Fund III LP (EIN 81-2683910). The acquisition was funded by HPE Fund IV equity capital of approximately $1.24 billion and co-investment from Prescott Capital Management LP of approximately $620 million (15,500,000 shares at $40.00 per share). Prescott subsequently sold 4,474,000 shares in a secondary offering, reducing its holdings to 11,026,000 shares (approximately 14.8% of the outstanding common stock).
This acquisition is relevant to two critical provisions of the Code:
• IRC § 355(e) Plan Analysis: HPE Fund IV's September 2019 acquisition of a 62.4% controlling interest in Veldran constituted a change of control. Under IRC § 355(e), if the Spin-Off and the HPE Fund IV acquisition are treated as part of a "plan (or series of related transactions)," Veldran would be required to recognize gain on the distribution of Meridian stock. The temporal gap between the acquisition (September 20, 2019) and the anticipated distribution (Q4 2022) is approximately three years, which, while significant, does not benefit from any bright-line statutory safe harbor. The regulations under Section 355(e) employ a facts-and-circumstances test with various presumptions that require careful factual analysis. This issue is discussed further in Section III.B below.
• IRC § 355(d) Disqualified Distribution Analysis: Under IRC § 355(d), if immediately after the distribution any person holds "disqualified stock" in either the distributing or controlled corporation that constitutes a 50-percent-or-greater interest, the distributing corporation recognizes gain. "Disqualified stock" includes stock acquired by purchase within the five-year period ending on the date of distribution. HPE Fund IV's September 2019 acquisition of Veldran stock was a purchase, and the five-year period from September 20, 2019 would not have expired by the anticipated Q4 2022 distribution date. The Section 355(d) analysis memorandum (dated July 8, 2022) concluded preliminarily that Section 355(d) should not apply because the Spin-Off was structured as a pro rata distribution and HPE Fund IV would hold the same proportionate interest in both Veldran and Meridian following the distribution; however, the analysis involved certain technical complexities that warranted continued attention.
III. Reasons for Dormancy
The client's decision to pause the proposed Spin-Off indefinitely, and the corresponding decision to mark this matter dormant, was the product of multiple converging factors. While the immediate catalyst was the client's business judgment regarding market conditions and timing, the decision was significantly influenced by unresolved legal and factual issues that Calderwood & Harkness had identified as impediments to the delivery of a "should" level tax opinion. The principal factors are discussed below.
A. Business Purpose Weakness
IRC § 355 requires that a distribution of stock of a controlled corporation be motivated by one or more substantial, bona fide, corporate-level business purposes. Treasury Regulation § 1.355-2(b)(1) provides that Section 355 applies to a distribution only if it is carried out for "one or more corporate business purposes." A distribution that is motivated solely by a shareholder-level purpose, such as personal tax planning or liquidity objectives of a controlling shareholder, does not satisfy this requirement. Treasury Regulation § 1.355-2(b)(2) further provides that a corporate business purpose requires "a real and substantial non Federal tax purpose germane to the business of the distributing corporation, the controlled corporation, or the affiliated group."
In the course of this engagement, two preliminary corporate-level business purposes were identified by the client and Veldran management to support the proposed Spin-Off:
(i) Independent Capital Allocation: The separation of the Engineered Coatings Division and the Precision Flow Solutions Division into two independent public companies would enable each business to pursue capital-allocation strategies tailored to its distinct growth profile, capital intensity, and competitive dynamics, free from the constraints of competing for resources within a combined enterprise.
(ii) Enhanced Management Focus and Operational Efficiency: The separation would allow the management teams of each business to focus exclusively on the operational priorities, customer requirements, and market opportunities specific to their respective industries, thereby enhancing accountability, responsiveness, and long-term value creation.
Calderwood & Harkness identified a significant concern with these articulated purposes. The concern was first raised in the Business Purpose Memorandum dated July 18, 2022, which was prepared by Garrett Simmons and reviewed by Leonard Cross. The substance of the concern was communicated to the client by Leonard Cross in an email to Christine Yeung dated July 22, 2022.
The concern was as follows: both of the articulated business purposes, as currently framed and supported by the factual record developed to date, could be characterized as primarily serving the fund-level objectives of HPE Fund IV — specifically, the objective of returning capital to HPE Fund IV's limited partners and facilitating the monetization of HPE Fund IV's investment in Veldran — rather than serving genuine corporate-level interests of Veldran as an operating company. In particular:
• The "independent capital allocation" rationale appeared to be driven, at its core, by HPE Fund IV's desire to create a separately traded security (Meridian common stock) that could be more easily monetized or distributed to HPE Fund IV's limited partners, rather than by any demonstrated need of either business segment for a different capital allocation approach that could not be achieved within the existing corporate structure.
• The "management focus and operational efficiency" rationale, while facially reasonable, was not well supported by evidence that the combined structure was creating material operational inefficiencies or management distractions. Veldran management had not identified specific instances in which the combined structure had caused the loss of business opportunities, customer relationships, or operational performance.
This concern was underscored during a conference call held on August 15, 2022, which was attended by Leonard Cross, Sylvia Hartwell, and Garrett Simmons from Calderwood & Harkness; Christine Yeung, Marcus Adler, Diana Fenn, and Tobias Rourke from Harrowgate; Jonathan Caldecott and Philip Crundell from Veldran; and Priya Chandrasekar from Whitfield & Gage. During this call, Veldran's Chief Executive Officer, Jonathan Caldecott, was asked to articulate in specific terms the corporate-level business purposes that would be served by the Spin-Off. Mr. Caldecott had difficulty articulating business purposes that were independent of HPE Fund IV's strategic investment objectives. While Mr. Caldecott acknowledged in general terms that separation could benefit each business, his responses repeatedly circled back to the benefits of the transaction from Harrowgate's perspective as an investor seeking liquidity.
Calderwood & Harkness advised the client, both in the July 22, 2022 email and during the August 15, 2022 call, that a business purpose driven primarily by the private equity sponsor's liquidity needs or fund-level monetization objectives would be vulnerable to challenge by the Internal Revenue Service. The IRS has historically scrutinized spin-off transactions involving private equity sponsors to determine whether the distribution is genuinely motivated by corporate-level business purposes or is instead a mechanism for the sponsor to monetize its investment on a tax-free basis. Calderwood & Harkness further advised that, on the facts as currently developed, the firm would not be in a position to render a "should" level tax opinion that the business purpose requirement of IRC § 355 and Treasury Regulation § 1.355-2(b) was satisfied.
This issue was not resolved at the time of dormancy and constituted the principal impediment to the completion of the tax opinion. Resolving this issue would require either: (a) the development of additional facts demonstrating genuine, substantial, corporate-level business purposes independent of HPE Fund IV's fund-level objectives, supported by contemporaneous documentation and management testimony; or (b) a material restructuring of the narrative supporting the Spin-Off.
B. § 355(e) Plan Risk
IRC § 355(e) provides that if a distribution that otherwise qualifies under Section 355 is "part of a plan (or series of related transactions)" pursuant to which one or more persons acquire, directly or indirectly, stock representing a fifty-percent-or-greater interest (by vote or value) in the distributing corporation or any controlled corporation, the distributing corporation shall recognize gain on the distribution as if the stock of the controlled corporation distributed were sold for its fair market value on the date of distribution.
HPE Fund IV acquired its 62.4% stake in Veldran on September 20, 2019, which constituted a change of control. The temporal gap between the September 2019 acquisition and the anticipated Q4 2022 distribution date is approximately three years. Under the regulations promulgated under IRC § 355(e), specifically Treasury Regulation § 1.355-7, there is no bright-line statutory safe harbor that applies at exactly three years. The regulations employ a presumption framework that examines whether the distribution and the acquisition were part of a "plan" based on a series of factors, including (but not limited to):
• whether there were discussions, negotiations, or agreements regarding the distribution (or a similar transaction) at or before the time of the acquisition;
• whether the distribution was foreseeable at the time of the acquisition;
• the extent to which the acquisition was motivated by the possibility of a subsequent distribution;
• the length of time between the acquisition and the distribution;
• whether the acquiring person participated in or facilitated the distribution; and
• the extent to which the economic benefits of the distribution are captured by the acquirer.
The first draft of the Section 355(e) plan analysis memorandum, completed on June 28, 2022, reached a preliminary conclusion that the HPE Fund IV acquisition and the proposed Spin-Off should not be treated as part of a plan within the meaning of IRC § 355(e) and the regulations thereunder, based on the following factors: (i) the three-year temporal gap, while not dispositive, was substantial; (ii) the Calderwood & Harkness team was not aware of any evidence that the possibility of a spin-off was discussed or contemplated in connection with the September 2019 acquisition; and (iii) the decision to explore the Spin-Off appeared to have been made in late 2021 or early 2022, more than two years after the acquisition.
However, the factual record supporting the absence of pre-acquisition discussions about a potential spin-off was thin and required reinforcement. Specifically, Calderwood & Harkness had requested (in the second draft of the Representation Letter, circulated on July 11, 2022) that Harrowgate and Veldran provide formal, executed representations confirming that:
(a) at the time of the September 2019 acquisition, neither HPE Fund IV, Harrowgate Capital Advisors, nor any of their respective officers, directors, or investment professionals had discussed, considered, or proposed a spin-off, split-off, or other disposition of the Precision Flow Solutions Division;
(b) the decision to explore a spin-off of the Precision Flow Solutions Division was first discussed internally at Harrowgate no earlier than the fourth quarter of 2021;
(c) no pre-acquisition due diligence materials, investment committee memoranda, or similar documents prepared in connection with the September 2019 acquisition referenced or contemplated a potential spin-off or separation of any Veldran business segment; and
(d) no agreements, understandings, or arrangements, whether formal or informal, existed at the time of the acquisition regarding the disposition or separation of any Veldran business segment.
These representations had not been finalized or executed at the time of dormancy. The second draft of the Representation Letter was circulated to Christine Yeung and Priya Chandrasekar on July 11, 2022, but no executed version was returned. Calderwood & Harkness had received informal verbal assurances from Ms. Yeung that the representations were factually accurate, but verbal assurances are insufficient to support a "should" level tax opinion on this issue. The formal, executed representations are essential to establishing the factual predicate for the Section 355(e) analysis.
The magnitude of the potential tax exposure if Section 355(e) were to apply is substantial. Veldran would be required to recognize gain on the distribution of Meridian stock in an amount equal to the excess of the fair market value of the Meridian stock over Veldran's adjusted tax basis in such stock. Based on the Brackenridge & Co. preliminary valuation range and the estimated adjusted tax basis, the estimated built-in gain is between $596.5 million and $902.4 million. At the applicable 21% corporate income tax rate, the estimated federal income tax liability that would be triggered by a Section 355(e) determination would be in the range of approximately $125.3 million to $189.5 million. State income tax liabilities could add materially to this exposure, depending on the applicable apportionment factors.
The combination of the incomplete factual record, the absence of executed representations, and the magnitude of the potential tax exposure constituted a meaningful risk factor that contributed both to Calderwood & Harkness's inability to finalize the tax opinion and to the client's decision to pause the Spin-Off.
C. Deteriorating Market Conditions
During mid-2022, equity valuations in the industrial sector declined materially in response to rising interest rates, inflation concerns, supply chain disruptions, and broader macroeconomic uncertainty. The S&P 500 Industrials Index experienced significant downward pressure during this period, and comparable public company multiples for precision flow control and industrial equipment companies compressed substantially from their 2021 peaks. These market developments reduced the attractiveness of a spin-off from a valuation and monetization perspective, as the implied valuation of Meridian as a standalone public company would be lower than previously anticipated, and the opportunity for HPE Fund IV to realize attractive returns through a post-spin monetization event (whether by secondary offering, block trade, or other disposition) would be diminished.
Marcus Adler, Harrowgate's Founding Partner and Chairman, expressed this concern directly during the August 15, 2022 conference call. Mr. Adler stated that current market conditions made the timing of a spin-off and any potential post-spin monetization of HPE Fund IV's Meridian stake unattractive, and that it would not be prudent to proceed with the Spin-Off in the current market environment given the costs and complexity involved. Mr. Adler further noted that HPE Fund IV had no urgency to effect a distribution given the fund's remaining life and the availability of alternative value-realization strategies.
While market conditions are not a tax issue per se, and are not relevant to the analysis of whether the Spin-Off qualifies for tax-free treatment under IRC § 355, the deterioration in market conditions materially affected the client's willingness to invest the resources necessary to resolve the open tax issues, bear the costs of completing the transaction structure and documentation, and assume the residual tax risks associated with the Spin-Off. The client's business judgment that the timing was not right effectively eliminated the urgency that might otherwise have driven the resolution of the business purpose and Section 355(e) issues.
D. Lender Consent Uncertainty
Calderwood & Harkness's analysis of the debt instruments in Veldran's capital structure identified significant lender consent and covenant compliance issues that would need to be resolved before the Spin-Off could be consummated.
First Lien Term Loan B: Calderwood & Harkness's credit agreement spin-off covenant analysis memorandum (completed August 2, 2022) concluded that the proposed Spin-Off would likely constitute both a "Disposition" and an "Investment" under the defined terms of the credit agreement governing Veldran's First Lien Term Loan B (administrative agent: Ashfield National Bank, N.A.; aggregate principal amount: approximately $1.1 billion). The transfer of Precision Flow Solutions Division assets to Meridian would constitute a Disposition of such assets by Veldran, and the receipt of Meridian stock (prior to its distribution) could be characterized as an Investment. Under the credit agreement's restrictive covenants, these transactions would require either available capacity under the relevant negative covenant baskets or, if such capacity were insufficient, the consent of the required lenders. Preliminary discussions with Margaret Tsao of Ashfield National Bank indicated that the required basket capacity was not available and that the lender group would require significant negotiation regarding the terms of any consent or amendment, and would potentially require a refinancing of the Term Loan B — a process that would add substantial cost, complexity, and timeline risk to the transaction. Ms. Tsao further indicated that the lender group would likely require, as a condition of any consent, that Veldran retain the term loan obligation (rather than allocating a portion to Meridian) and that the credit agreement be amended to reflect the reduced asset base of Veldran following the Spin-Off, including potential additional collateral requirements and adjusted financial covenants.
6.250% Senior Unsecured Notes due 2027: Calderwood & Harkness's indenture spin-off covenant analysis memorandum (completed August 3, 2022) concluded that the distribution of Meridian stock could trigger the asset-sale covenant contained in the indenture governing Veldran's 6.250% Senior Unsecured Notes due 2027 (trustee: Colton Trust Company; aggregate principal amount: $450 million). The transfer of substantially all of the assets of the Precision Flow Solutions Division to Meridian, followed by the distribution of Meridian stock to shareholders, could be characterized as an asset sale (or deemed asset sale) under the indenture. If so characterized, Veldran would be required to comply with the indenture's asset-sale covenant, which included requirements for the application of net proceeds and potentially an offer to repurchase the notes. Alternatively, Veldran could seek a waiver or consent from the noteholders. The memorandum also noted that the indenture's asset-sale covenant contained a carve-out for certain spin-off transactions, but the carve-out appeared to require, among other conditions, that a tax opinion at a "should" level or higher be delivered confirming the tax-free nature of the Spin-Off — creating a circular dependency in which the ability to consummate the Spin-Off depended on the delivery of a tax opinion, and the delivery of the tax opinion depended on the resolution of the business purpose and Section 355(e) issues described above.
The combination of the First Lien Term Loan B consent requirements and the indenture covenant issues introduced additional transactional uncertainty and cost that further contributed to the client's decision to pause the Spin-Off. Neither the credit agreement consent/amendment process nor the indenture waiver process had been formally initiated at the time of dormancy.
IV. Status of Work Product at Dormancy
A. Timeline of Key Milestones
The following is a chronological summary of key milestones in the engagement from opening through dormancy:
B. Completed Work Product
The following work product was completed (in the sense of having been drafted to at least a first-draft stage) during the engagement and is preserved in the firm's document management system under Matter Code HRW-SPIN-001:
1. Comprehensive § 355 Analysis Memorandum — First draft, dated May 20, 2022. This memorandum provides an overview of all of the requirements for tax-free treatment under IRC § 355 and identifies the key issues and risk areas specific to the proposed Spin-Off. It served as the framework document for the more detailed issue-specific memoranda listed below.
2. § 355(b) Active Trade or Business Analysis Memorandum — Kestrel Issue — Dated June 1, 2022. This memorandum analyzes whether the Precision Flow Solutions Division satisfies the five-year active trade or business requirement under IRC § 355(b), with particular focus on the implications of the June 2019 Kestrel acquisition under IRC § 355(b)(2)(C) and (D).
3. Continuity of Interest / IRC § 368(a)(1)(D) Reorganization Analysis Memorandum — Dated June 15, 2022. This memorandum analyzes whether the Contribution qualifies as a reorganization under IRC § 368(a)(1)(D), including analysis of the continuity of interest and continuity of business enterprise requirements, the "substantially all" requirement under IRC § 354(b)(1)(A), and the distribution requirement under IRC § 354(b)(1)(B).
4. § 355(e) Plan Analysis Memorandum — First draft, dated June 28, 2022. This memorandum analyzes whether the proposed Spin-Off and the September 2019 HPE Fund IV acquisition constitute part of a "plan" under IRC § 355(e) and the regulations thereunder, including application of the safe harbors, presumptions, and factors set forth in Treasury Regulation § 1.355-7.
5. § 355(d) Disqualified Distribution Analysis Memorandum — Dated July 8, 2022. This memorandum analyzes whether the proposed Distribution would constitute a "disqualified distribution" under IRC § 355(d), focusing on whether any person would hold "disqualified stock" representing a 50-percent-or-greater interest in Veldran or Meridian immediately after the Distribution.
6. Business Purpose Memorandum — First draft, dated July 18, 2022. This memorandum evaluates the business purposes articulated for the Spin-Off against the requirements of Treasury Regulation § 1.355-2(b) and identifies the concerns regarding the potential characterization of the articulated purposes as primarily shareholder-level rather than corporate-level.
7. State and Local Tax Considerations Summary Memorandum — Dated July 20, 2022. This memorandum summarizes the state and local income, franchise, and transfer tax implications of the Spin-Off in key jurisdictions, including Delaware, North Carolina, Georgia, New York, and other states in which Veldran and the Precision Flow Solutions Division have significant operations or filing obligations.
8. Device Test Analysis Memorandum — Dated July 25, 2022. This memorandum analyzes whether the proposed Distribution would be "used principally as a device for the distribution of the earnings and profits of the distributing corporation, the controlled corporation, or both" within the meaning of IRC § 355(a)(1)(B) and Treasury Regulation § 1.355-2(d).
9. Draft Tax Matters Provisions for Separation Agreement — Dated July 28, 2022. These provisions were drafted for insertion into the Separation and Distribution Agreement being prepared by Whitfield & Gage and Thornapple McCord, and address the allocation of tax liabilities, tax indemnification, cooperation on tax matters, and restrictions on post-spin actions that could affect the tax-free nature of the Spin-Off.
10. Credit Agreement Spin-Off Covenant Analysis Memorandum — Dated August 2, 2022. This memorandum analyzes the restrictive covenants in the credit agreement governing Veldran's First Lien Term Loan B as they relate to the proposed Spin-Off.
11. Indenture Spin-Off Covenant Analysis Memorandum — Dated August 3, 2022. This memorandum analyzes the covenants in the indenture governing Veldran's 6.250% Senior Unsecured Notes due 2027 as they relate to the proposed Spin-Off.
12. Draft Tax Sharing Agreement — Outline and Key Terms — Dated August 4, 2022. This document sets forth an outline and summary of key terms for the proposed Tax Sharing Agreement between Veldran and Meridian, which would govern the allocation of pre-spin tax liabilities, the preparation and filing of pre-spin and straddle-period tax returns, and indemnification obligations.
13. First Draft Tax Opinion Letter — Dated August 5, 2022. This draft opinion letter was circulated to Christine Yeung and Priya Chandrasekar and was prominently marked as a draft not for reliance. It contains open placeholders, qualifications, and unresolved issues (including the business purpose issue and the Section 355(e) plan analysis). It reflects the state of the analysis as of its date and should not be treated as a final or near-final opinion.
14. Internal Comments Compilation on Draft Opinion — Dated August 10, 2022. This document compiles the comments and markup provided by Leonard Cross and Sylvia Hartwell on the first draft tax opinion letter. These comments were not incorporated into the draft prior to dormancy.
15. Representation Letter — First draft dated May 6, 2022; second draft (redline against first draft) dated July 11, 2022. The Representation Letter sets forth the factual representations to be provided by Veldran and Harrowgate in support of the tax opinion, including representations regarding business purposes, the Section 355(e) plan analysis, the active trade or business requirement, the absence of a device, and other factual predicates. The Representation Letter was not finalized or executed.
16. Tax Diligence Information Request Lists — Initial request dated April 25, 2022; supplemental Kestrel-specific request dated May 16, 2022. These documents itemize the information and documentation requested from Veldran management and its advisors in connection with Calderwood & Harkness's tax diligence review.
17. Diligence Tracker Spreadsheet — Last updated August 29, 2022. This spreadsheet tracks the status of all diligence items requested, received, and outstanding.
18. Conference Call Memoranda and Correspondence File — Includes memoranda summarizing key conference calls (including the April 18, 2022 kick-off call and the August 15, 2022 business purpose call) and all significant email correspondence among the engagement team, the client, and other advisors.
C. Outstanding / Incomplete Items
The following items were outstanding or incomplete at the time of dormancy and would need to be addressed if the matter is reactivated:
1. Business Purpose Articulation. The business purposes for the Spin-Off, as currently articulated, are insufficient to support a "should" level tax opinion. The concern described in Section III.A above — namely, that the articulated purposes are primarily driven by HPE Fund IV's fund-level objectives rather than genuine corporate-level interests of Veldran — was not resolved. Resolution would require either the development of additional facts demonstrating substantial corporate-level business purposes or a material restructuring of the rationale for the Spin-Off.
2. § 355(e) Factual Record. The factual representations confirming that no pre-September 2019 discussions, negotiations, or understandings regarding a potential spin-off or separation of the Precision Flow Solutions Division existed at or before the time of the HPE Fund IV acquisition were requested in the second draft of the Representation Letter (circulated July 11, 2022) but were not finalized or executed by Veldran or Harrowgate. The absence of these executed representations is a gap in the factual record that would need to be filled before the Section 355(e) plan analysis could be finalized.
3. Representation Letter. The second draft of the Representation Letter was circulated on July 11, 2022, but was not finalized or executed by Veldran or Harrowgate. Finalization of the Representation Letter is a prerequisite to the delivery of any tax opinion.
4. Tax Opinion. The first draft of the tax opinion letter was circulated on August 5, 2022, but it contains open placeholders and qualifications, and internal comments from Leonard Cross and Sylvia Hartwell (compiled August 10, 2022) have not been incorporated. The draft opinion is not in final form and should not be relied upon by any person for any purpose.
5. Tax Sharing Agreement. The Tax Sharing Agreement between Veldran and Meridian remains at the outline and key terms stage. A full-form agreement has not been drafted.
6. Outstanding Diligence Items. The diligence tracker spreadsheet, last updated August 29, 2022, reflects that certain items requested from Veldran management remain outstanding, including (without limitation):
(a) certain historical Veldran state income tax returns for the 2019 and 2020 tax years for several jurisdictions;
(b) detailed schedules and documentation of intercompany transactions between the Engineered Coatings Division and the Precision Flow Solutions Division, including intercompany pricing methodologies and transfer pricing documentation;
(c) a complete schedule of intellectual property assets to be transferred to Meridian, including registered patents, trademarks, and trade names, together with associated tax basis information; and
(d) supporting documentation for certain Section 338 election analyses considered (but apparently not made) in connection with the Kestrel acquisition.
7. Meridian Incorporation. Meridian Flow Technologies, Inc. (SpinCo) was never incorporated. No certificate of incorporation was filed, no shares of stock were issued, and no organizational resolutions were adopted. Incorporation of SpinCo is a prerequisite to the Contribution and Distribution.
8. Lender and Trustee Consents. Neither the credit agreement consent/amendment process with the Term Loan B lender group (through Ashfield National Bank) nor the indenture waiver/consent process with the Senior Unsecured Noteholders (through Colton Trust Company) was formally initiated. These processes would need to be commenced and completed before the Spin-Off could proceed.
V. Work Product Preservation Instructions
All memoranda, draft opinions, draft transaction documents (including the draft Representation Letter, draft Tax Matters provisions, and draft Tax Sharing Agreement outline), correspondence (including emails), diligence materials, the diligence tracker spreadsheet, conference call memoranda, time records, billing records, and all other materials relating to this engagement are to be preserved in the firm's document management system under Matter Code HRW-SPIN-001, Engagement Number 1003-00005. All documents should be organized by work product type and date in accordance with the firm's standard filing conventions for tax advisory matters.
Physical files, if any, are to be boxed, labeled with the matter code and engagement number, and stored in accordance with the firm's records retention policy, which generally requires retention of closed or dormant matter files for a period of not less than ten (10) years following the date of closure or dormancy, unless a longer retention period is required by applicable law or regulation or is otherwise specified by the engagement team.
The draft tax opinion letter (dated August 5, 2022) and all supporting analysis memoranda are attorney work product, protected by the attorney work product doctrine and, to the extent applicable, the attorney-client privilege. All such documents should be clearly and prominently marked as drafts, not for reliance, and should not be produced, disclosed, or made available to any person outside the firm without the prior written approval of the Responsible Partner, Leonard Cross.
Access to the matter within the firm's document management system should remain restricted to the members of the engagement team — Leonard Cross, Sylvia Hartwell, Garrett Simmons, and Leila Nazari — and to firm administration and records management personnel as necessary for file management and compliance purposes.
The matter may be reactivated at the client's request. The client, through Christine Yeung, has been informed of this possibility in a separate letter from Leonard Cross to Ms. Yeung dated August 29, 2022, which also confirms the dormancy of the matter, the preservation of work product, and the status of unbilled fees. Upon reactivation, the engagement team should review and update all work product to account for any intervening changes in law, regulations, IRS guidance, or facts.
VI. Billing and Financial Summary
A. Hourly Rates (2022)
The applicable hourly rates for the timekeepers on this engagement during the 2022 billing year are a

MEMORANDUM

REVIEWED AND APPROVED BY:

Record

Parties

Dates

Amounts